Legislators have raised taxes on the rich and cut the 13th month paycheck, an annual extra-month salary bonus given to public employees as the government attempts to raise revenues and cut spending to stay solvent.

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The overleveraged ones will cut back spending as they try to stay out of bankruptcy, and even solvent consumers will react to their shrinking home prices by saving more, Rosenberg says.

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As a result, say the Democratic boffins, Social Security benefits would have to be cut by 54% for those 30 or younger in 2002 to keep the system solvent.

ECONOMIST: Social Security reform: The battle of the boffins | The